Antonakes discloses bureau’s “next big mortgage project”

By Katalina M. Bianco, J.D.

Consumer Financial Protection Bureau Deputy Director Steven Antonakes talked mortgages, the bureau’s goal of promoting a strong housing sector, and the steps the CFPB has taken to achieve that goal in remarks before the American Mortgage Conference. Antonakes also gave attendees a heads up on what he called the bureau’s “next big mortgage project”: mortgage disclosures. He followed-up by cautioning lenders to get to work now on implementing the disclosures rule.

Activity overview. Antonakes described the steps the bureau has taken to tackle consumer issues in the housing market. Drafting rules that ensure there are no debt traps, surprises, or runarounds was a priority for the bureau. When considering rules, the bureau took a “back-to-basic” approach that marked a return to traditional mortgage lending. The deputy director spoke of the CFPB’s mortgage loan origination rules, including loan originator compensation and ability-to-repay rules.

Antonakes also spoke of the CFPB’s servicing rules, saying that when “the tsunami of delinquencies hit” during the financial crisis, servicers were unprepared to work with borrowers. “The existing low-cost, high-volume servicing model was ill equipped to help individual homeowners deal with their problems.” Consumers did not get appropriate support, such as timely and accurate information, he said. The bureau’s servicing rules helped consumers to know where they stand. For example, servicers now must send monthly statements that show how the monthly payment was applied and contain all important information in one place. Servicers also must inform consumers, well in advance, of interest rate adjustments.

Next big project. The bureau’s next big project is the new Know Before You Owe initiative on mortgage disclosure forms that will become effective in August 2015, Antonakes said. He noted that for more than 30 years, federal law generally required that within three business days of receiving a mortgage application, mortgage lenders must deliver two different, overlapping disclosures to consumers. Under the bureau’s new rule, consumers now will receive a single form three business days after applying for a loan—the Loan Estimate. They will get a second form—the Closing Disclosure—three business days before finalizing a loan.

Start working on the rule now. Antonakes stressed that while the forms are not required until August 2015, mortgage lenders should be working on the new rule now. Significant changes to business operations and technology platforms will require close collaboration with third-party service providers, he said. “While many mortgage institutions are already deep into implementing these changes, we want to make sure that everyone understands the need to be focusing on August 2015 now.” Antonakes said that the bureau allowed 21 months for the industry to implement these changes, “but we are now nearly halfway through that time.”

Compliance assistance. Antonakes outlined some of the tools the bureau has provided to make compliance with the disclosure rule more palatable. In April, the CFPB introduced a Truth in Lending Act-Real Estate Settlement Procedures Act Regulatory Implementation webpage. Posted on the webpages is a Small Entity Compliance Guide explaining the new requirements for disclosing information on the new forms along with sample forms for different types of loans.

The CFPB also developed a guide to walk through the form content, field by field. Antonakes said that to date, the bureau has received very positive feedback on the materials. The deputy director mentioned that the bureau also has been streamlining interpretive guidance on the new provisions and delivering it through a series of webinars. A link to the recorded webinars can be found on the Regulatory Implementation website.

Finally, within the next few months, the bureau will publish a readiness guide intended to give industry a broad checklist of things to do to prepare for the rules taking effect, such as updating policies and procedures and providing training for staff.